You Are Considering Adding a Microbrewery onto One of Your

question 30

Multiple Choice

You are considering adding a microbrewery onto one of your firm's existing restaurants.This will entail an investment of $40,000 in new equipment.The new equipment falls under asset class 43 and has a capital cost allowance (CCA) rate of 30%.If your firm's marginal corporate tax rate is 35%,then what is the value of the microbrewery's CCA tax shield in the first year of operation?

• A)$2100
• B)$14,000
• C)$5200
• D)$26,000
• E)$6000

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Definitions:

Average Total Cost

The cost per unit of output, calculated by dividing the total production cost by the quantity of units produced.

Basketballs

Inflated balls used in the game of basketball, designed according to specific regulations in terms of size and weight.

MC

The additional cost of producing one more unit of a product or service.

TVC

Total Variable Cost, which refers to the total of all costs that vary with output level in the short term.